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26 Apr 2016
Brazil: Copom announcement unlikely to bring surprises - Rabobank
According to analysts from Rabobank, the meeting of the Brazil Central Bank is unlikely to bring surprises. They expect the central bank to continue in a “wait and see” mode.
Key Quotes:
“Since the last meeting of the Copom (monetary policy committee) – on March 02, 2016 – macro and market developments have been broadly favorable for the medium-term inflation outlook. Although these events may have reduced a bit the perception of inflation risks by the Committee, the recent movements still seem insufficient to radically change the current policy stance and forward guidance (stable rates for now). Especially amid lingering (domestic, global) uncertainties.”
“We believe the Copom will probably choose to keep a similar statement as in recent meetings, buying time and flexibility. Our scenario has two rate cuts (50bps) in the last meetings of 2016 (October 19, November 30), taking the Selic to 13.25%. Still, a lasting solution for Brazil’s fiscal woes remains a necessary condition for the upcoming easing cycle to mean convergence towards friendlier neutral rates (and not just temporary cuts).”
“All in all, we believe Wednesday’s Copom announcement is unlikely to bring major surprises to the markets. Given the still-high uncertainty on the fiscal side (as highlighted in recent BCB communications), with potential influences on the FX rate and inflation expectations, we believe the Copom will probably wait a bit longer before giving boldersigns or making stronger commitments about rate cuts.”
“In our view, “wait and see” continues to be the best strategy at this juncture, yet some recent developments have been apparently paving the way for Selic rate reductions some time in the near future.”
Key Quotes:
“Since the last meeting of the Copom (monetary policy committee) – on March 02, 2016 – macro and market developments have been broadly favorable for the medium-term inflation outlook. Although these events may have reduced a bit the perception of inflation risks by the Committee, the recent movements still seem insufficient to radically change the current policy stance and forward guidance (stable rates for now). Especially amid lingering (domestic, global) uncertainties.”
“We believe the Copom will probably choose to keep a similar statement as in recent meetings, buying time and flexibility. Our scenario has two rate cuts (50bps) in the last meetings of 2016 (October 19, November 30), taking the Selic to 13.25%. Still, a lasting solution for Brazil’s fiscal woes remains a necessary condition for the upcoming easing cycle to mean convergence towards friendlier neutral rates (and not just temporary cuts).”
“All in all, we believe Wednesday’s Copom announcement is unlikely to bring major surprises to the markets. Given the still-high uncertainty on the fiscal side (as highlighted in recent BCB communications), with potential influences on the FX rate and inflation expectations, we believe the Copom will probably wait a bit longer before giving boldersigns or making stronger commitments about rate cuts.”
“In our view, “wait and see” continues to be the best strategy at this juncture, yet some recent developments have been apparently paving the way for Selic rate reductions some time in the near future.”